The Bank of England (BoE) is set to announce its latest policy decision on Thursday, marking its seventh rate meeting of 2025. Most analysts expect the ‘Old Lady’ to hold fire and keep the base rate steady at 4%, following the cut delivered on August 7.
Once the announcement is made, the Bank will publish the meeting Minutes, providing a closer look at the debate behind the decision. While the market’s base case is for no change, a 25-basis-point cut isn’t completely off the table. With the UK economy appearing increasingly fragile and the fiscal picture continuing to worsen, there remains a case for the BoE to ease monetary policy a little further.
### Cooling Inflation and Fiscal Woes
The Bank of England kept interest rates on hold at 4% in September, following a 7-2 vote by the Monetary Policy Committee (MPC) to maintain current levels. Members Swati Dhingra and Adam Taylor backed a 25-basis-point cut, following the quarter-point reduction delivered in August.
In its latest statement, the BoE reiterated its forecast that inflation will peak around 4% this month before gradually easing back to the 2% target by mid-2027. Regarding economic growth, bank staff expect GDP to rise by 0.4% in the July-to-September quarter — a modest increase that still avoids contraction.
Fresh data from the Office for National Statistics showed headline Consumer Price Index (CPI) inflation rising to 3.8% in September, while core inflation (excluding food and energy) eased slightly to 3.5%. Services inflation, a closely watched metric by the BoE, remained stubborn at 4.7%, suggesting that underlying price pressures have yet to fully cool.
Meanwhile, the fiscal outlook remains challenging. Chancellor Rachel Reeves warned on Tuesday that broad tax rises could be on the horizon as she seeks to avoid a return to austerity. She described her upcoming second annual budget as one built on “hard choices,” aiming to protect public services while keeping Britain’s debt under control.
With the budget just three weeks away, Reeves painted a bleak backdrop featuring pandemic-era debt, weak productivity, and sticky inflation. Her comments hinted that she might break Labour’s election pledge not to raise major taxes—a politically risky move intended to reassure investors that the government is committed to managing borrowing responsibly.
### BoE Policymakers Take a Cautious Tone
Recent remarks from BoE policymakers suggest a more cautious approach. MPC member Megan Greene stated a couple of weeks ago that she didn’t see a strong case for the bank to continue cutting rates at the current quarterly pace, though she acknowledged the easing cycle isn’t finished yet.
Governor Andrew Bailey highlighted the October labor market data as evidence that underlying inflation pressures continue to cool. He also pointed out that ongoing tariff uncertainty is affecting business investment decisions. However, for now, this does not appear to be filtering through to consumer prices.
### How Will the BoE Interest Rate Decision Impact GBP/USD?
Investors widely expect the BoE to hold its reference rate at 4% on Thursday at 12:00 GMT. While the rate decision itself seems fully priced in, attention will focus on the vote split among MPC members. An atypical vote outcome could move the market and impact the British Pound.
Leading up to the meeting, GBP/USD has encountered notable resistance near the psychological 1.3000 threshold. “Cable came under some strong and persistent downside pressure after hitting monthly tops near 1.3730 on September 17,” said Pablo Piovano, senior analyst at FXStreet.
Piovano notes that a decisive break below 1.3000 could see the pair slip back to the April valley at 1.2707 (April 7). On the upside, he identified the key 200-day Simple Moving Average (SMA) at 1.3254 as an important hurdle, followed by minor resistance levels at the weekly top at 1.3471 (October 17) and the October ceiling at 1.3527 (October 1).
Meanwhile, a short-term technical bounce should not be ruled out, as the Relative Strength Index (RSI) is currently in the oversold region at around 24, Piovano concludes.
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Stay tuned for the BoE’s announcement and the release of the meeting Minutes to gauge the path ahead for UK monetary policy and its impact on currency markets.
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